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<L3* 



94th Congress 
2d Session 



COMMITTEE PRINT 



A NEW ECONOMIC PARTNERSH [P WI 
LATIN AMERICA 




A REPORT 

BY 

Senator Jacob K. Javits 

TO THE 

COMMITTEE ON FOREIGN RELATIONS 
UNITED STATES SENATE 

ON HIS 

TEIP TO BRAZIL, PEKU, PANAMA, COLOMBIA, 
AND VENEZUELA 

January 4-14, 1976 




MARCH 1976 



Printed for the use of the Committee on Foreign Relations 



66-815 



U.S. GOVERNMENT PRINTING OFFICE 
WASHINGTON : 1976 






COMMITTEE ON FOREIGN RELATIONS 



JOHN SPARKMAN, Alabama, Chairman 



MIKE MANSFIELD, Montana 

FRANK CHURCH, Idaho 

STUART SYMINGTON, Missouri 

CLAIBORNE PELL, Rhode Island 

GALE W. McGEE, Wyoming 

GEORGE S. McGOVERN, South Dakota 

HUBERT H. HUMPHREY, Minnesota 

DICK CLARK, Iowa 

JOSEPH R. BIDEN, Jr., Delaware 

Pat M. Holt, Chief of Staff 
Arthur M. Kuhl, Chief Clerk 



CLIFFORD P. CASE, New Jersey 
JACOB K. JAVITS, New York 
HUGH SCOTT, Pennsylvania 
JAMES B. PEARSON, Kansas 
CHARLES H. PERCY, Illinois 
ROBERT P. GRIFFIN, Michigan 



(H) 



CONTENTS 



Letter of transmittal v 

Brazil 2 

Peru 5 

Panama 6 

Colombia 7 

Venezuela 8 

Itinerary 9 

Remarks by Senator Javits on New Brazil-United States Economic Policy 
before the Brazilian-United States Chamber of Commerce, January 6, 

1976, in Sao Paulo, Brazil 13 

Remarks by Senator Jacob K. Javits before the Venezuelan-American 

Chamber of Commerce, January 13, 1976, in Caracas, Venezuela 17 

(Hi) 



Digitized by the Internet Archive 
in 2013 



http://archive.org/details/neweartnOOunit 



LETTER OF TRANSMITTAL 



United States Senate, 
Washington, D.C., March 8, 1076. 

Hon. John Sparkman, 

Chairman, Committee on Foreign Relations, 

U.S. Senate, Washington, D.C. 

Dear Mr. Chairman: During the Christmas-New Year recess, I 
traveled to five countries in Latin America; Brazil, Peru, Panama, 
Colombia, and Venezuela. 

My purpose there was threefold: The first was to investigate the 
economic changes that have taken place since my last trip to Latin 
America in 1966. This is an important endeavor in light of the eco- 
nomic initiative undertaken by the United States at the Seventh Spe- 
cial Session of the United Nations General Assembly in September, 
1975. Secondly, I undertook to discuss major political issues of con- 
cern to both the United States and Latin America, and thirdly, to 
determine the status of the Panama Canal negotiations. 

I would like to take this opportunity to thank the State Department, 
especially William D. Rogers, Assistant Secretary of State for Inter- 
American Affairs, for assistance in organizing my trip. 
Sincerely, 

Jacob K. Javits. 

(V) 



A NEW ECONOMIC PARTNERSHIP WITH LATIN 

AMERICA 



Report by Senator Jacob K. Javits on His Trip to Latin America, 
January 4 to January 14, 1976 

During the Christmas-New Year's recess, I traveled to five countries 
in Latin America in my capacity as a member of the Senate Foreign 
Relations Committee and ranking member of the Latin American 
Subcommittee. I was accompanied by my Special Assistant for Eco- 
nomic Affairs, Frank Ballance. I arrived in Rio de Janeiro, Brazil 
on the morning of January 4 and also visited Sao Paulo and Brasilia. 
My visit included stops in Lima, Peru ; Panama and the Canal Zone ; 
Bogota, Colombia ; and Caracas, Venezuela. 

My last trip to Latin America was in 1966, and extensive changes 
have occurred in Latin America since that time. The two most im- 
portant trends have been the loss of democratic government in sev- 
eral Latin American countries and very substantial economic growth 
in a number of countries. 

The purpose of my trip was to investigate the economic changes that 
have taken place in Latin America over the last decade, an especially 
important task in light of the new policy respecting economic devel- 
opment in developing countries announced by the United States at the 
Seventh Special Session of the United Nations General Assembly in 
September, 1975. This Session represented a major initiative in United 
States policy toward the developing countries, and the role of the Con- 
gressional Advisors to the U.S. delegation, of which I was a member, 
was crucial in the development of the U.S. position. 

A second important reason for my trip was to discuss major po- 
litical issues of concern both to the United States and Latin America. 
These include such major concerns of U.S. policy as limitations on hu- 
man rights and press censorship in certain countries of Latin America, 
notably Brazil and Chile; progress or lack of it toward more demo- 
cratic government in such countries as Brazil and Peru; Latin Amer- 
ican attitudes on such issues as the Middle East, the anti-Zionism vote- 
in the United Nations and Angola ; and issues of economic importance 
such as the role of multinational corporations, nationalization of prop- 
erties of U.S. nationals, and the new Generalized System of Pref- 
erences (GSP), which the United States put into effect on January 
1, 1976. 

A third and perhaps most important aspect of my trip was to de- 
termine the status of the Panama Canal negotiations, an issue of over- 
whelming importance for Panama, but also of great concern to the 
other nations of Latin America. 

Tndeed, the Panama Canal issue is the single most important matter 
of mutual concern for the United States in Latin America. The 

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United States ought to look on the Panama Canal negotiations as a 
major opportunity to demonstrate its good will and capacity to deal 
with sensitive issues affecting closely related developing countries. A 
successful negotiation between the United States and Panama, lead- 
ing to the ratification of a new treaty, could mark the beginning of a 
new policy relationship with Latin America, which could provide ma- 
jor benefits for both the United States and Latin America in every 
other area of mutual interest. 

A little more than two years ago, Secretary Kissinger announced a 
"New Dialogue" policy towards Latin America, but the enormous 
changes in the world economy which have taken place since then, 
including the emergence of OPEC monopoly power and the subsequent 
exclusion of Venezuela and Eucador from the Generalized System of 
Preferences, have caused the "New Dialogue" already to become some- 
what outdated. 

So, today the United States has in effect a non-policy toward Latin 
America. But United States disillusionment with the United Nations 
and the growing economic importance of Latin America demand a 
new, positive policy towards our neighbors of the hemisphere. 

A new economic partnership is required between the United States 
and the countries of Latin America — a partnership that takes into 
account their increasing economic strength and their desire to assert 
their independence even as they recognize the necessity for interde- 
pendence with the United States. 

BRAZIL 

Brazil has been one of the great economic success stories of modern 
times. Brazil's growth rate has averaged 10% for the decade of the 
1960's and early 1970's, but her growth rate has now been cut in half 
as a result of the world recession, high oil prices, and restrictive eco- 
nomic policies Brazil believed were needed to curb the growth of 
imports. Brazil's oil bill has jumped from $300 million in 1972 to $3 
billion in 1975. Brazil will have a trade deficit of roughly $3.5 billion, 
or more for 1975, necessitating foreign borrowing and the drawdown 
of foreign exchange reserves. 

Brazil regards the trade imbalance with the United States as par- 
ticularly serious. The United States has a favorable balance of trade 
with Brazil of about $1.5 to $1.7 billion. Some means must be found 
to trim this deficit to a more reasonable level ; this will mean U.S. out- 
reach to encourage Brazilian exports as now permitted by the Gen- 
eralized System of Preferences ; and perhaps including an agreement 
along the lines of the voluntary Japanese-U.S. textile agreements of 
a few years ago. 

An additional irritating factor stated by the Brazilians is U.S. 
countervailing duties on shoes, castor oil, and now leather handbags. 
They feel deeply aggrieved by these duties, even though the total vol- 
ume of trade in each category is quite small. In fact, Brazilian exports 
of these goods seem to be doing well in spite of the countervailing 
duties. The issue of countervailing duties is interesting for its psycho- 
logical impact on Brazilian leaders, because it represents an ambival- 
ence among Brazilians about whether Brazil is a developing country or 
is moving to developed status. While there is an argument on the 



merits, Brazil is rapidly moving away from a condition in which it can 
be construed even in the eyes of its main trading partners to be giving 
a subvention to the export of any of its products and expect these 
efforts to be ignored by other developed nations. However, the keen- 
ness with which Brazilians feel aggrieved by U.S. countervailing 
duties is evidence of a desire still to be treated in a special way by the 
U.S. and should be treated with an understanding spirit in the U.S. 
even if we cannot agree. 

The new Generalized System of Preferences, which the United 
States put into effect on January 1, 1976, should be of major benefit 
to Brazil, and other countries in Latin America. The Brazilians had 
not yet fully grasped the importance of this new trade advantage, but 
the emphasis I gave to it should help them take advantage of the 
GSP to their benefit and ours. I told the Brazilians I meant that I 
understood and sympathized with their trade problems with us, but 
that there must be reciprocity in our dealings, and that they should 
focus on the larger issues of trade. I pledged myself to assist in dealing 
with various trade problems on a bilateral basis. 

Brazil regards the continuing inflow of foreign investment as ex- 
tremely important in its development plans. There are a large num- 
ber of American multinational corporations operating in Brazil, and 
their representatives in Brazil are enthusiastic about their operations 
in Brazil and the cooperation of the Brazilian Government. Brazil's 
success in attracting foreign investment is a matter of setting an 
attractive climate for multinational corporations, and is not the result 
of particular laws on foreign investment. The Government has re- 
served certain sectors for major government participation : petroleum, 
communications and utilities; but manufacturing is entirely open to 
foreign investment. Brazil operates a powerful set of incentives to 
encourage investment such as exemption from import duty for plant 
and equipment, special financing, and rebates of income tax if invest- 
ment is made in the more underdeveloped regions. The refusal of 
these incentives can act as a bar to investment if the competition in 
Brazil already has them. For example, Brazil has decided that it 
already has enough automobile manufacturing companies and does 
not want any more. Although other manufacturers would like to enter 
the market, Brazil will not grant them the incentives that would make 
them competitive with existing operations. 

Brazil's investment strategy is particularly impressive because it 
opposes the trend widely followed in the developing countries of na- 
tionalizing industry and limiting foreign investment. Brazil's free 
market economy is testimony to the vitality of private enterprise, and 
can be expected to continue. 

Yet, one must be realistic about the very close relationship that 
exists between business and the Government in Brazil. Many business- 
men in Brazil view the Government very favorably because of the 
encouragement it offers business, its control over the organized labor 
movement (which is relatively weak in Brazil), and the fact that any 
suppression of human rights does not impinge on the business com- 
munity. I would argue that multinational corporations are injured 
in the local public mind by their identification with the concept of 
authoritarian government, and that enlightened business policy should 
make them sympathetic to democratic government institutions. 

66-815—76 2 



There is little doubt that democratic governments are pushed by 
their people toward more egalitarian policies that are less receptive 
to multinational corporations. The example of Venezuela, which I 
also visited, makes this clear. However, I regard it as dangerous for 
business to identify closely with authoritarian government, because 
political liberalization, which must inevitably come even to Brazil, 
will produce a climate of hostility toward multinational corporations. 
I would like to quote what I said on this subject before the Venezuelan- 
American Chamber of Commerce in Caracas at the end of my trip : 

It is argued in some circles that authoritarian governments create a friendly 
climate for private business. I regard this as a real delusion. The fact is that 
people seeking human rights should feel that enlightened business is their ally, 
and not against them. For a climate of denying human rights must inevitably 
become a climate of denying human rights to business and to the individuals 
who carry on business, too. The U.S. is full of friends of those who strive for 
human rights and democratic government in Latin America. 

Brazil is clearly emerging from developing country status, and I 
urged the Brazilians to join the ranks of the developed countries. 
There is quite a division of opinion on this subject in Brazil, with 
some leaders feeling that Brazil is still a member of the Third World, 
and some Brazilian actions in the United Nations confirming this 
role — the most disturbing and difficult being Brazil's vote for the 
Anti-Zionist resolution. Others feel that Brazil's rightful place is 
with the developed countries, and such actions as the nuclear tech- 
nology deal with West Germany tend to push Brazil into the indus- 
trial camp. This is not an issue that will be solved immediately. Brazil 
is in fact at least two countries, a poor Northeast and Amazon area 
with low per capita incomes, and a prosperous industrial region along 
the South Atlantic, with the greatest concentration of industrial out- 
put in Sao Paulo, which area has a per capita annual income of 
roughly $2000. 

Although the U.S. should welcome the addition of Brazil to the 
ranks of the developed countries, and I expect that this will occur 
within the next few years. I think it is fair to say that the industrial 
countries expect a certain level of political development to match 
Brazil's economic output. Brazil cannot continue indefinitely to grow 
economically outside a democratic framework and effective human 
rights safeguards. Brazil is in its eleventh year of military rule, and 
while there has been a degree of liberalization in recent months, as 
for example in the congressional elections in November, 1974, which 
were won by the opposition MDB party, there have been distressing 
lapses. The most notable of these publicly was the admitted death of 
Vladimir Ilerzog. a leading journalist, in a Sao Paulo prison, although 
the Government claims he committed suicide. Also, there have been 
constant reports of a significant number of other cases of torture, dis- 
appearance into supposed imprisonment, and other violations of 
human rights in Brazil to cause grave international concern. It is said 
Brasilia is against such inhumane practices yet that is where the cen- 
tral authority exists to stop them. A good sign is the recent announce- 
ment in the Washington Post that President Geisel has removed the 
second Army Commander in Sao Paulo. 

There is an excellent and diverse press in Brazil, but it is not yet 
free. Even while I was in Brazil, two elected deputies of the opposi- 



tion MDB party lost their seats in the Chamber of Deputies through a 
process known as "cassation" and also lost their civil rights for 10 
vears: their eviction was on an order from President Geisel under a 
Brazilian law giving him that power. These are not events to give any 
friend of representative government and human rights other than 
deep concern. 

My feelings about Brazil must be those of many who look closely 
at this enormous nation with its huge potential. On the one hand, one 
is greatly impressed by the vitality of the Brazilian people and the 
economic miracle they have produced. On the other, one must be very 
concerned about the slow progress in political development and the 
continuing bad reports on human rights. Brazil has been remarkably 
successful to date because of her rapid rate of economic growth, which 
has meant greater prosperity for many at the lower end of the eco- 
nomic scale (although no improvement in the distribution of wealth), 
and has provided the more ambitious members of the poorer groups 
with an opportunity for upward mobility into the middle class. Slower 
growth for Brazil will slow the spread of these benefits, and the Gov- 
ernment is clearly aware of the political upheavals that a really poor 
growth rate might engender. 

Brazil has great expertise to offer to the other nations of the Third 
World in demonstrating how to pursue a dynamic path to develop- 
ment. I look forward to a continuing growth in understanding and 
commerce between the United States and Brazil, which will be greatly 
facilitated by democratic government and respect for human rights. 

PERU 

Peru, which lias been ruled by a military government since 1968, 
just experienced another change of government with the coining to 
power of General Morales Bermudez at the end of August, 1975. Gen- 
eral Morales Bermudez is widely regarded as a pragmatic and stable 
leader, and it is hoped that he will be able to deal with some of the 
mounting economic problems that Peru faces. 

Peru is attempting a most interesting experiment in development 
that places it somewhere between capitalism and socialism. It has 
embarked on the most ambitious land reform program in Latin Amer- 
ica. In many ways Peru seems to wish to develop along the lines of 
Yugoslav worker participation and ownership, with the workers as 
a whole having an interest in the means of production, but without 
the individual ownership rights that would characterize a peoples' 
capitalism. 

Relations between the United States and Peru have improved con- 
siderably as a result of the settlement of a series of investment disputes 
with the United States, and the progress towards the settlement of the 
claim in the case of the Marcona nationalization. Although Peru is 
active in Third World diplomacy, there seems to be a desire to im- 
prove relations with the United States. 

The American business community in Peru expressed its concern 
over the pace of nationalization required by the policies adopted by 
the Andean Group, of which Peru is a member. For manufacturing 
and mining companies 45 percent of the shares must be transferred to 



6 

Peru by 1981. The greatest worry is losing control over their companies 
management through this process. The law of labor stability prevents 
companies from dismissing workers. The real question for most busi- 
nessmen is whether there will continue to be a private sector in Peru. 

According to the Minister of Finance, Dr. Barua, the first civilian 
in the military government, Peru recognizes economic pluralism, and 
has devised four different types of enterprise to fit various conditions. 
There is a government owned public sector, which includes basic in- 
dustry and infrastructure ; a social property sector, in which the soci- 
ety as a whole owns the enterprises such as cooperatives or farms (al- 
though this is heavily emphasized, it is recognized that this will take a 
long time to accomplish) ; a reformed private sector, in which a so- 
called "industrial community" receives the increased equity participa- 
tion of the workers produced by the required divestiture of the pres- 
ent owners ; and a small entre-preneurial sector, for which the law is 
now in preparation. 

Multinational corporations do not yet have their own role deter- 
mined under domestic legislation, although they will fit into the re- 
formed private enterprise sector. The Minister admitted the need for 
the establishment of norms under which multinationals would operate. 

Peru represents a most interesting social experiment, but success 
will depend on economic growth and flexibility of government policy. 
It will be important to give business the ability to maintain the efficient 
operation of their enterprises as workers gain increasing ownership 
in them. Management must have enough elbow room to manage if it 
is to be successful. It is much better to encourage business to respond 
to incentives, such as in training workers, than to force them to hold 
on to employees that hinder their successful operation. 

Peru is enthusiastic about the Andean Pact as a means to enlarge 
her markets and rationalize production among the smaller countries 
of Latin America. The United States should consider working with 
the Andean Group toward the most constructive use of the economic 
rationalization and community it is seeking to achieve. 

There is no doubt that Peru has a very difficult road ahead in the 
coming years. To the extent that pragmatism tempers her imaginative, 
but untried social ideas, Peru should have a chance of succeeding in 
her ambitious plans. 

PANAMA 

As I stressed in all my public statements in Latin America, the 
issue of the Panama Canal negotiations at this time is the single most 
important issue for the United States in Latin America. Latin Amer- 
ica regards the outcome of the Panama Canal negotiations as the lit- 
mus test of our intentions towards Latin America and as the possible 
foundation of a new policy relationship in Latin America. 

I believe that a satisfactory settlement with Panama on the Tack- 
Kissinger principles for the Panama Canal is entirely in order. 

I had a long and most useful discussion with General Torrijos just 
prior to his departure — with a large group of Panamanian leaders — 
for a week's visit to Cuba. I understood the reasons for his trip, which 
was arranged before the Cuban intervention in the Angolan civil war, 
but I felt U.S. public opinion would be watching his statements in 
Cuba very carefully. 



I was very clear on the climate of opinion in the United States 
about the Panama Canal, and stressed that however much there might 
be a body of opinion in Panama regarding the Canal Zone as a "colo- 
nial" relic, it is not generalty perceived that way in the United States. 

While I understand Panama's desire for rapid movement in the 
negotiations, we have to be realistic about the length of time it will 
take to deal with the very complicated issues remaining. General Tor- 
rijos obviously is unable to commit Panama indefinitely in the negoti- 
ations, but I am veiy hopeful a new treaty may be agreed upon 
seasonably. 

General Torrijos struck me as a dedicated nationalist desirous of 
obtaining the best possible result for Panama as he sees it. I believe 
it is possible to negotiate a new treaty that will be acceptable to the 
Panamanians and the United States on the basis of the eight Tack- 
Kissinger principles which are the foundation of the negotiations. 

United States interest in the canal centers on four goals ; the Canal 
must be open, safe, efficient, and neutral. I believe that the standard 
must be one of performance in keeping with these goals, and that 
Panamanians recognize that a substantial transition time will be neces- 
sary if a high level of performance is to be maintained. 

The Panama Canal is very important in Panama's future develop- 
ment plans, and among the best elements of insurance for the con- 
tinued satisfactory performance of Canal operations is its central 
place in the economy of Panama. Panama's Minister of Planning has 
developed a diversified plan for Panama's economy, which hinges in 
large part on efficient Canal operations. His projects include new 
transportation plans for container ports, a new airport with expanded 
cargo operations, and better rail connection parallel to the Canal. 
Panama also hopes to expand materially its tourism, open a major 
copper mine, and develop further the already dynamic banking busi- 
ness and free port there. Panama has a free market economy, and has 
experienced growth rates near 8 percent until the recent worldwide 
recession. 

COLOMBIA 

This was my first visit to Colombia and I was impressed by the 
vitality of its democratic institutions and its determination to stand 
on its own. Colombia is the most industrially developed country in 
the Andean Group, and is also the most developed agriculturally. 
Colombia does not have the oil riches of neighboring Venezuela, al- 
though it has been self-sufficient in oil until very recently. 

Colombia's main concern with the United States is in expanded 
trade, as a market for Colombia's increasing production of processed 
and manufactured products. U.S. tariff and non-tariff provisions as to 
textile and leather imports are of great concern to Colombia, but 
Colombia can also benefit substantially from the Generalized System 
of Preferences. 

Within the Andean Group Colombia is striving for lower common 
external tariffs, the removal of governmental export and other busi- 
ness subsidies and rational market allocation of resources. Her posi- 
tion is opposed by Peru and Venezuela, both of which want more act tve 
government intervention in the location of industries and a much 
higher external tariff. I explored with officials in Colombia the possi- 



8 

bility of greater U.S. cooperation with the Andean Group, either 
through a U.S./Andean Economic Commission, or through regional 
tariff preferences for those items not granted preferential treatment 
under GSP. For Colombia in particular the United States might con- 
sider a bilateral agreement on textiles that would permit a quota limit 
per year adjusted to U.S. market shares. 

Colombia is also proceeding with a gradual nationalization program 
of industry along the lines set down in the Andean Group. A number 
of businessmen thought that private enterprise in Colombia was not 
doing a satisfactory job in helping to narrow the gap between rich 
and poor, and should take a much more active role in spreading the 
benefits of ownership to workers. One imaginative scheme along these 
lines in Colombia involved the acquisition of the Bavarian Breweries 
from foreign interests in World War II. and the subsequent sale of 
shares to over 200,000 shareholders in Colombia. 

The business community stressed the need for local decision-making 
powers for management of foreign owned companies, and also felt that 
a longer term view of such interests was necessary. 

General economic conditions are good in Colombia, with a satisfac- 
tory growth in foreign exchange reserves, and o-ood prospects for the 
coffee crop. 

Colombia, like Brazil, has a form of economic planning, but it 
focuses primarily on the Federal and municipal governments, rather 
than setting targets for industry. Colombia has also tried the interest- 
ing experiment of taking the plan to the people for discussion, and 
found that it was extremely popular. 

I discussed the Panama Canal situation with President Lopez, who 
has been a positive influence in the negotiations. The Canal is quite 
important for Colombia as a good deal of her trade passes through 
the Canal. 

We also discussed the need for U.S. assistance to Colombia to help 
her control the narcotics trade, and I hope to seek further U.S. 
assistance following the lines of the President's State of the Union 
(1976). 

We mentioned the possibility of the development of a technology 
data bank, which has been proposed for the Americas. This could be a 
most helpful initiative to Colombia. 

The ratification of the Treaty on the Quinta Suena Islands by the 
Senate is held in high importance in Colombia, and the delay is not 
at all understood. 

Finally, we discussed plans for the portion of the Pan American 
highway from Panama to Colombia through the Darien Gap. which 
awaits the completion of a zone free of hoof and mouth disease. 

VENEZUELA 

Venezuela is a country of enormous vitality in the midst of an oil 
boom. Caracas has expanded rapidly in the last few years. 

The single greatest source of irritation in Venezuelan-U.S. rela- 
tions is the exclusion of Venezuela and Ecuador from the Generalized 
System of Preferences. This exclusion was added by the House of 
Representatives to the Trade Act of 1074 in irritation over OPEC 
policy, although Venezuela actually increased its oil shipments to the 



United States during the oil embargo. In my judgment it may be 
possible to deal with this exclusion constructively in the context of 
overall U.S.-Latin American relations, but it cannot be dealt with 
satisfactorily in energy legislation. 

Venezuela is greatly concerned over the possibility of severe infla- 
tion from the severance pay to be provided oil workers as part of the 
nationalization of oil company properties that occurred at the begin- 
ning of the year. Although half of the severance pay is to be deposited 
in banks payable on final severance, the other half paid in cash repre- 
sents a great injection of spending power in the economy. There are 
also worries over worker access to the 50 percent of the fund deposited 
on final severance. 

Venezuela has played a very active role in the Seventh Special 
Session of the United Nations and other fora in which international 
economic problems have been discussed. Venezuela has taken a leading 
role in providing assistance to her neighbors in Latin America. 

Finally, Mr. President, my visit to Venezuela indicated a govern- 
ment which has very strong democratic foundations which is strug- 
gling with the problems of a large amount of money rather than 
inadequate money, and has not yet learned how to get the use and 
benefit of it down to the lower economic ends of the population, but 
it is really trying. Also, I found in Venezuela the greatest feeling of 
sensitivity, almost hostility, to the United States. Though by no means 
a pervasive feeling of a majority of the people, it is a warning sign 
that a nation which is coming along rapidly, economically, like Vene- 
zuela, begins to take a certain pride and dignity in its stand. I found 
the Venezuelans very irritated by the alleged discrimination in the 
Trade Act by eliminating them from the Generalized System of Pref- 
erences because they are membei's of OPEC. I think we will have 
to do something about mollifying that particular feeling of deeply 
injured national pride. 

Second, the Venezuelans are watching with great interest what we 
do about the Panama Canal as a way of determining whether the 
policy of the United States toward Latin America will be truly one 
of mutual respect and interdependence, or whether we may lapse into 
old ways, which will be disagreeable and distasteful to them. 

Altogether, Mr. President, I urge my colleagues to visit Latin 
America. It is a totally new continent now, with new strivings, new 
wealth, new productivity, a new self-reliance and a new sense of its 
own importance in the world. Just as Europeans have a profound 
special relationship with Africa, I urge my colleagues in Congress to 
recognize a comparable special relationship between the United States 
and the countries of all of Latin America, which will be fortified by 
our loyal and cooperative activities in association with them in the 
Organization of American States. 

Itinerary 

brazil 

I arrived in Rio on January 4, a Sunday, and began my program 
on January 5 with a meeting with the Secretary of Industry, Com- 
merce and Tourism. Dr. Marcel Hasslocher. During the day I also 



10 

met with distinguished groups of United States and Brazilian busi- 
ness leaders. 

On the morning of January 6 I flew to Sao Paulo, where I appeared 
as the luncheon speaker before the U.S. Chamber of Commerce in 
Sao Paulo. During the day I met a number of Brazilian and American 
businessmen, journalists and publishers, and the Secretary of Agri- 
culture for Sao Paulo State, Dr. Pedro Tassinari Filho. 

On January 7 I flew to Brasilia, where I met a number of ministers 
and government officials. I began with a meeting with the Planning 
Minister, Dr. Reis Velloso, with whom I discussed my own efforts 
jointly with Senator Humphrey to initiate an indicative form of eco- 
nomic planning for the United States. 

I paid a call on the President of the Senate, Senator Jose de Magal- 
haes Pinto, and a number of Senators and Deputies. 

I next had a long discussion and lunch with the Minister of Foreign 
Affairs, Dr. Antonio Azeredo da Silveira. After lunch I had meetings 
with the President of the Bank of Brazil, Dr. Angelo Calmon de Sa ; 
the Chief of the President's Civil Household, General Golbery de 
Couto e Silva ; Minister of Mines and Energy, Dr. Shigeaki Uekif and 
the President of the Central Bank o,f Brazil, Dr. Paulo Lira. 

I held a press conference on the morning of January 8 before flying* 
from Brasilia to Lima, Peru. 

PERU 

I arrived in Lima, Peru at noon on January 8, and spent the after- 
noon and earl}' part of the following morning in Lima. In the after- 
noon I met members of the American business community in Peru, 
visited the headquarters of ADELA, an investment company for 
Latin America which I "fathered" that combines profitability and 
development goals through private enterprise and met both the Min- 
ister of Finance, Dr. Luis Barua. and the Minister of Foreign Affairs, 
General Miguel Angel de la Flor. I held a press conference that 
evening, and in the morning just prior to my departure I met with 
the President of Peru, General Morales Bermudez. 

PANAMA 

I arrived in Panama at noon on January 9 and met later that 
afternoon with General Omar Torrijos, the Chief of Government, 
and afterwards with the Minister of Planning and Economic Policy, 
Dr. Nicolas Barletta. On January 10 I had a working breakfast with 
Governor Parfitt of the Canal Zone and members of the Panama 
Canal Company and the Canal Zone Government staff. Afterwards 
I was briefed by Lt. General D. P. McAuliffe, the commander of 
the U.S. Southern Command. I met also with Dr. Juan Tack, the 
Minister Negotiator in charge of the Panama Canal negotiations 
for Panama ; members of the business community ; the regional direc- 
tor of the National Maritime Union, Mr. Rene Lioeanjie; and the 
Archbishop of Panama, Msgr. Marcos McGrath. 



11 

COLOMBIA 

I arrived in Bogota in the late evening on January 10 and met 
on January 11 with a number of leading Colombian and U.S. busi- 
nessmen, and later with the Minister of Finance, Dr. Eodrigo Botero. 
On Januar}' 12 I met leading members of the press at a working 
breakfast. Afterwards I met the Director of the Planning Board, 
Dr. Migues Urrutia, had lunch with the President of Colombia, 
his Excellency Dr. Alfonso Lopez Michelsen, and the Foreign Minis- 
ter, Dr. Indalecio Lievano Aguirre. After a press conference at the 
airport, I left .for Caracas about 5 :30 p.m. 

VENEZUELA 

I arrived in Caracas in the late evening on January 12, and began 
my working day on January 13 with a breakfast meeting with the 
President of Venezuela, his Excellency Dr. Carlos Andres Perez, and 
leading members of his cabinet. After a meeting with Deputy Oswaldo 
Alvarez Paz, Acting President of the National Congress, I spoke 
at a luncheon meeting of the Venezuelan- American Chamber of Com- 
merce. In the afternoon I met the Minister of Finance, Dr. Hector 
Hurtade, and the Governor of the Federal District of Caracas, Di\ 
Diego Arria. 



Eemarks by Sexator Javits on Xew Brazil-United States Eco- 
nomic Policy Before the Brazilian-U.S. Chamber of Commerce, 
January 6, 1976, in Sao Paulo, Brazil 

It is a pleasure for me to be here with you today. 

I believe that the people of the U.S. realize that the relations with 
the nations of Latin America since World War II, which have been 
variously characterized as the Good Neighbor, the Alliance for Prog- 
ress and the Good Partner, are now out of date, so much so that a 
theory has arisen, perhaps due to our anxiety to keep out of political 
interference in Latin America, that the U.S. has veered toward a non- 
policy. Whatever may be the arguments pro and con on this issue, the 
time has come to express in a plan of action a new policy of economic 
interdependence among equals in this Hemisphere. 

Economic interdependence with Western Europe and Japan in the 
decades following World War II was institutionalized by various 
means and resulted in an unprecedented expansion of the global econ- 
omy. It produced economic growth, fostered industrialization and en- 
couraged development in every quarter of the globe. 

Recently this interdependence has been severely strained by the 
rapid five-fold increase in the price of oil commencing in 1973 which 
has dealt a critical blow to global stability and prosperity. Inflation, 
recession and payments balances significantly worsened in all the in- 
dustrialized world and in those nations — like your own — that had 
realized substantial progress toward industrialization and develop- 
ment were crossing the development threshold. 

Indeed, almost inadA^ertently, we have seemed not to notice that some 
Latin American nations are moving rapidly over the threshold and 
are. or are on the way to becoming, developed. Of these nations Brazil 
is a probable case in point. 

The broad answer therefore seems to be — come and join the devel- 
oped countries. Brazil. Thereby, you will recognize the new economic 
interdependence, the fact of your own development and the need of 
the developing countries to learn from you how to handle foreign in- 
vestment, and that economic maturity brings with it duties as well as 
rights. 

For my country I feel will welcome more than anything else a more 
broadly shared responsibility for the world's economy by nations with 
the good faith toward the individual and the means' and will to help 
him to help himself. 

In response to this broad challenge, the U.S. has committed itself to 
a serious and wide-ranging program of cooperation between the devel- 
oping and developed world. Much of that program, which was pre- 
sented at the Seventh Special Session of the United Nations General 
Assembly in September, is aimed at those countries like Brazil that 
are well along the path of economic development. . . . 

I recognize very well that the phenomenal economic development 
experienced by Brazil in recent years is due. in large part, to the rapid 

(13) 



14 

expansion and diversification of its exports. We, as your principal cus- 
tomer, are greatly impressed with the immense growth in our bilateral 
trade, a trade which benefits both of our countries. A quick review of 
the trade statistics makes the point abundantly clear : in the five year 
period 1969-1974. Brazilian exports to the U.S. nearly tripled from a 
little over $600 million to $1.7 billion. 

Such a substantial growth, even when discounted for inflation, is 
bound to create some frictions and, more seriously, may cause some 
dislocations in the importing country. Though trade increases the eco- 
nomic welfare of both the importing and exporting countries, rapid 
market-disruptive increases in imports can cause severe economic hard- 
ship on particular economic groups. This aspect of our trading rela- 
tionship has given rise to some apprehensions in Brazil and elsewhere, 
but I believe it has been blown way out of proportion. . . . 

Apart from the growth in trade, another feature which merits dis- 
cussions is the composition of Brazil's exports to the U.S. The tradi- 
tional view of Brazil as solely an exporter of coffee and other raw 
materials while importing finished manufactures is not an accurate 
reflection of reality. . . . 

Brazilian exports to the U.S. range from the traditional coffee to 
electrical machinery, from sugar to electronics, from iron ore to fin- 
ished steel products. In 1973, the United States was the market for 35 
percent of Brazil's exports of finished manufactures as compared to 
13 percent purchased by the EC and 3 percent by Japan. This dynamic 
growth in exports of manufactured goods did not occur by chance. 
Farsighted planning and investment in industry by both the public 
and private sector have made this possible. The expansion of Brazil's 
productive capacity has enabled it to compete most effectively in the 
U.S. and other markets and thereby reap the rewards of an open and 
expanding international trading system. 

Despite the overall healthy growth and diversification of Brazilian 
exports to the United States, apprehensions continue to be expressed 
that the U.S. is experiencing a resurgence of protectionism. These 
apprehensions are clearly contradicted not only by the policy state- 
ments made by President Ford and other government officials, but 
also by an objective appraisal of trade actions taken by the U.S. 
Government. 

First, as to the policies, I want to make clear that Congress has the 
constitutional authority to set trade policy. This authority was exer- 
cised in 1974 when the Congress enacted the Trade Act. The Trade 
Act itself has a primary objective, the further development of an open 
world trading system based on the principle of free and nondis- 
criminatory trade. Additionally, the Trade Act specifically recognized 
the trade of the developing countries and granted the Executive lega] 
authorities with which to meet them. President Ford. Secretary 
Kissinger and other Executive Branch officials have reiterated these 
basic objectives of the Trade Act in various policy statements made 
since the passage of the Act. . . . 

The Trade Act pays particular attention to the trading needs of onr 
developing country trading partners. It provides authority for the 
President to implement a Generalized S.ystem of Preferences (GSP) 
which he did on January 1, 1976. Under GSP, the developing coun- 



15 

tries will be able to export to the U.S. market on a duty-free basis some 
2.724 products that had been previously dutiable. Over 885 of these 
products currently have duties of 10 percent or more when imported 
from developed countries. 

The GSP will be of special benefit to Latin America. Of the total 
amount of trade coverage of $2.5 billion in 1974 trade values, imports 
from Latin America accounted for more than $1 billion. Brazil alone 
exported nearly $200 million of eligible trade. Over 500 products ex- 
ported by Brazil in 1974 will be eligible for duty free treatment. This 
means that at least 53 percent of Brazil's exports to the U.S. would 
have entered duty free in 1974 if GSP had been in operation as con- 
trasted with the 41 percent that actually did. 

More important than the trade coverage figure, which is a static 
concept, is the broad U.S. market opened up on a preferential basis 
in imports in 1974 and was largely supplied by the developed coun- 
tries. Brazil now has a tariff incentive which will permit it to compete 
more effectively for this market. 

Similarly the dynamic element of our GSP, by opening up new 
preferential markets for Brazilian industries, will provide an incentive 
to expansion and diversification of exports in previously untapped 
product categories. Brazil, with its rapidly expanding and diversify- 
ing economy, should be a major beneficiary of this facet of GSP. 

The implementation of GSP is a significant policy initiative by 
the U.S. and one which constitutes a departure from our traditional 
adherence to the Most-Favored-Nation principle. The U.S. took this 
action largely in response to the urgings of our Latin American neigh- 
bors for improved, preferential access to the U.S. market. . . - 

Of greater significance than GSP for Brazil is the authority in the 
Trade Act which permits the United States to partake in the current 
round of Multilateral Trade Negotiations now underway in Geneva. 
Our trade negotiators have unprecedented authority to reduce and 
eliminate tariffs. Perhaps even more importantly, the United States is 
approaching these negotiations with a mandate to attack the problems 
of non-tariff barriers to trade. The benefits of GSP, while significant, 
are temporary, non-binding, and voluntary. The tariff reductions to 
be made in the MTN. on the other hand, are binding, lasting and can- 
not be withdrawn without the provision of other concessions and com- 
pensation. The reductions in non-tariff barriers which we hope to 
negotiate should likewise be of major benefit to Brazil. . . . 

I would like to end by emphasizing that trade policy actions can 
only create opportunities for increased exports, not automatic export 
increases. The GSP is a good example. Now that the GSP product list 
has been published some people view the GSP issue as over and done 
with. Nothing could be further from the truth. The creation of new 
trade opportunities is finished, for the time being. But the process of 
turning these opportunities into net flows of trade has just begun. 
Each new trade liberalization creates new opportunities. Countries 
and industries within them that do not put forth their best competitive 
efforts will lag behind. I have every confidence that Brazil and the 
industrialists of Sao Paulo will find themselves among the leaders and 
not among the laggards, . . . 



Remarks by Senator Jacob K. Javits Before the Venezuelan- 
American Chamber of Commerce, January 13, 1976, in Caracas, 
Venezuela 

"We seek a New Economic Partnership among the nations of the 
Americas, as the proper relationship between the developed and the 
developing countries in the Americas. 

The United States has now evaluated its role in dealing with the 
international problems of economic development and the proposals 
detailed by Secretary Kissinger at the Seventh Special Session of the 
United Nations General Assembly last September are the good faith 
evidence of that policy. I speak with some knowledge on this subject 
as I was a member of the Congressional Advisory Group which ad- 
vised the United States delegation to the Seventh Special Session. 

Venezuela's key position in the Seventh Special Session and subse- 
quent major role as a leading spokesman for the developing nations 
has made her views particularly important. 

Secretary Kissinger at the Seventh Special Session correctly stated 
that "the reality is that the world economy is a single global system of 
trade and monetary relations on which hinges the development of all 
our economies. . . . The United States firmly believes that the eco- 
nomic challenges of our time must unite us. and not divide us." No- 
where is this more true than in Latin America. The United States will 
grow increasingly interested in regional relationships in Latin Amer- 
ica in a realistic reappraisal of its role in the world caused by the dis- 
illusionment of many in the U.S. with certain actions of the United 
Nations General Assembly. There exists an enormous fund of good 
will toward the United States in Latin America and toward Latin 
America in the United States in spite of various understandable irri- 
tants. The countries of Latin America have great vitality and resil- 
ience, and some have made already remarkable progress i n their eco- 
nomic development. Although the world recession has temporarily 
diminished their rates of growth, the future offers great promise for 
many of their economies. 

The two years that have elapsed since the enunciation of the "New 
Dialogue'' policy for Latin America have seen vast changes occur in 
the world's economv. most, notably the sharp increase in world oil 
prices and the world recession, from which we are only just beginning 
to recover. Latin America may not have been hit so hard as other 
parts of the developing world, but here the impact is also being felt 
in lower growth rates and severe balance of payments problems in a 
number of countries. 

At the same time the developing countries have demonstrated a new 
unity and new power in international organizations in their attempt 
to redress the world's economic balance. 

My visit to our five American neighbor countries has given me a 
most vital impression of the variety of means and philosophies that 

(17) 



18 

are being implemented to solve these problems. Each country is re- 
markably different, yet in each I found a profound sense of shared 
destiny with other nations of the hemisphere and a great will to solve 
our problems in harmony. 

But I must stress that the countries of Latin America are not in- 
terested in new slogans ; they want serious action. If there is to be true 
equality among our nations, there will be give and take on both sides, 
replacing the old donor-recipient relationships of the past. I am sure 
the United States will be forthcoming and cooperative and do its full 
share and more in this new context. Indeed the efforts of Venezuela, 
Brazil, Columbia and others to aid their American neighbors in new 
and creative ways are, I believe, well appreciated in the United States. 

Although there are a number of issues one could discuss in this con- 
text of U.S. -Latin American relations, I want to single out three major 
ones for comment : the Panama Canal, human rights, and the role of 
private initiative in economic growth. 

The desire for a new Treaty on the Panama Canal unites all Latin 
Americans, and is currently the single most important issue for the 
United States in this hemisphere. It is also a major opportunity for 
the United States to inaugurate a new policy relationship in Latin 
America. Interest in the Canal centers on four goals ; the Canal must 
be open, safe, efficient and neutral. 

I believe the standard must be one of performance and that the 
four goals can be accomplished in a new Treaty negotiated under the 
Kissinger-Tack principles, which principles I support. 

Also, from my discussions in Panama, I am encouraged about the 
prospects for a new Treaty which the UjS. Senate will be able to ratify. 
This is an extremely important economic — as well as political — issue 
for Latin America as many of the Latin American countries send a 
greater percentage of their commerce through the Canal than does the 
United States. 

The ability of Panama and the U.S. to agree on a new Treaty also 
will, I feel, set the tone for the future of U.S.-Latin American 
relations. 

Respect for human rights varies substantially from country to 
country in Latin America, with the news stories out of Brazil and 
Chile being particularly serious from the point of vieiv of U.S. public 
opinion. Concern for the rights of individuals has led the U.S. Con- 
gress to deal quite strongly with the human rights issue in the recently 
passed foreign economic assistance legislation, and even more strongly 
in the military assistance bill which is now being considered in the 
Senate. I do not feel that the hemisphere can tolerate any abuse of 
individual human rights on the theory that it is necessary to the pro- 
motion of social stability and therefore of economic growth. There is 
an absolutely clear connection between respect for human rights and 
democratic government, and this explains why people in the U.S. con- 
sider democratic governments in this or any other part of the world to 
be so vital. 

I say this while being well aware that it is argued in some circles 
that authoritarian governments create a friendly climate for private 
business. I regard this as a real delusion. The fact is that people seek- 
ing human rights should feel that enlightened business is their ally, 



19 

and not against them. For a climate of denying human rights must 
inevitably become a climate of denying human rights to business and 
to the individuals who carry on business, too. The U.S. is full of 
friends of those who strive for human rights and democratic govern- 
ment in Latin America. 

Finally, I wish to speak of the role of private initiative and private 
investment in Latin America. There continues to be a substantial role 
for both domestic and foreign private investment here, although there 
are substantial differences over the amount of foreign private owner- 
ship that will be permitted. U.S. companies seem to me to be quite 
willing to be flexible on the question of ownership so long as they are 
not subject to discrimination and the rules of the game are spelled out 
clearly. 

The multinational corporation remains one of the creative private 
instruments for the transfer of capital and technology of our time, and 
can continue to be such an instrument because it is capable of pro- 
moting economic growth more efficiently than virtually any other 
mechanism. However, some companies have hurt the whole concept 
by reprehensible abuses and unethical practices which must be stopped. 

I foresee the development of a code of conduct for multinational 
corporations, under international auspices arising in part out of the 
work of the U.X. Group of Eminent Persons studying multinational 
corporations for the United Xations two years ago. of which I was a 
member, and other efforts. In our common interest to promote growth 
in the Americas we shall continue to need the services of private enter- 
prise and investment, and by mutual agreement I believe we can deal 
effectively with eliminating the abuses by some which have arisen. 

O 



UNIVERSITY OF FLORIDA 



3 1262 09113 1770